August 31, 2018 / 5:58 PM / 23 days ago

EU states must yield some sovereignty to consolidate arms industry - trade groups

BERLIN (Reuters) - German trade groups said European Union states will have to relinquish some sovereignty to implement German Finance Minister Olaf Scholz’s call for mergers in the European defence industry.

FILE PHOTO: German Finance Minister Olaf Scholz speaks at an event in Jouy-en-Josas, near Paris, France, August 29, 2018. REUTERS/Benoit Tessier/File Photo

Scholz told a business conference in France on Wednesday that governments should support mergers and stop concentrating projects solely on local companies to make better use of procurement spending and stay competitive.

Volker Thum, a former Airbus (AIR.PA) executive who now heads the BDLI German Aerospace Industries Association, agreed that changes were needed to allow European firms to keep up in an increasingly competitive global market.

“Given ever more complex and cost-intensive development programmes, this will only be possible through increased cooperation and a consolidation of the European defence industry,” Thum said in a statement to Reuters.

“Giving up some sovereignty would mean big gains in capability. We cannot afford to continue to have 28 isolated solutions,” he said, referring to the number of EU member states.

Hans-Christoph Atzpodien, managing director of the BDSV German Security and Defence Industry group, said the conditions were ripe for a more intensive European defence cooperation.

“The joint political and military will to cooperate is an important prerequisite for successful industrial cooperation. At the same time, it requires industrially doable structures that are not overshadowed by political wishes.”

Atzpodien said the defence industry could only become more European if military requirements, competitive conditions and export regulations were harmonised across the 28 member states.

Despite long-standing calls for mergers, European governments and defence contractors have made little progress towards consolidating the industry.

French Finance Minister Bruno Le Maire, who was at the conference with Scholz, said this month that plans to combine the civilian shipyards of French state-owned shipbuilder Naval Group and Italian group Fincantieri should not include defence assets.

The multinational Airbus A400M military transport plane has also set an uninspiring example for cross-border defence cooperation as the programme has been plagued by cost overruns and delays.

Reporting by Andrea Shalal; Editing by Mark Heinrich

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